US Attorney charges owners of TelexFree with fraud

Friday

May 9, 2014 at 3:15 PMMay 10, 2014 at 9:17 AM

By Scott O'ConnellDaily News Staff

Federal agents on Friday arrested one co-owner of accused pyramid scheme TelexFREE and have issued a warrant for the other, authorities said.James Merrill, who was arrested by Homeland Security Investigations agents on Route 9 in Worcester, and Carlos Wanzeler are both charged with conspiracy to commit wire fraud for their alleged roles orchestrating the worldwide multi-level marketing operation, with its U.S. headquarters in Marlborou."The scope of this alleged fraud is breathtaking," U.S. Attorney Carmen Ortiz said in a statement Friday. "As alleged, these defendants devised a scheme which reaped hundreds of millions of dollars from hard-working people around the globe."The scam was built around charging investors for accounts that allowed them to earn money by posting daily ads for the company. While TelexFREE purported to sell a phone service, authorities allege sales of the product only accounted for less than 0.1 percent of the company's total revenue.Investigators say the scheme primarily targeted Brazilian- and Dominican-Americans, some of whom invested tens of thousands of dollars in the company. Many of those investors claim they have essentially lost their money after TelexFREE abruptly shut down its multi-level marketing platform in early March and began forcing customers to start selling the phone product to withdraw money from their accounts.Both the Securities and Exchange Commission and Massachusetts Secretary of State filed complaints against TelexFREE a month ago, days after the company filed for bankruptcy in Nevada. The SEC also has obtained a court-ordered freeze on the company's assets.This past week, a judge ordered the bankruptcy case moved to Massachusetts.Merrill, 53, of Ashland, and Wanzeler, 45, of Northborough, told attorneys from the state's securities division in March they got into multi-level marketing together more than a decade ago, according to federal court records. At the time, Wanzeler, an immigrant from Brazil, had been an employee at Merrill's Ashland cleaning business.They started TelexFREE in 2012, and the company quickly took off, raising more than $300 million over the following two years, the SEC has estimated.Merrill made an initial appearance in U.S. District Court in Worcester Friday afternoon, according to authorities.Wanzeler is considered a fugitive; the SEC believes he may have fled to Brazil.Victims of TelexFREE can contact the Justice Department at USAMA.VictimAssistance@usdoj.gov.Scott O'Connell can be reached at 508-626-4449 or soconnell@wickedlocal.com. Follow him on Twitter: @ScottOConnellMW